Bankruptcy and Debt Arrangement Scheme (Miscellaneous Amendment) (Scotland) Regulations 2023: equality impact assessment

Background

In 2020, the Scottish Government committed to a policy review of its statutory debt solutions, including bankruptcy and DAS. This work has been taken forward using a stakeholder led approach which was agreed at a Ministerial Working Group on Statutory Debt Solutions in October 2020. Some changes have already been introduced and the proposal to remove the minimum debt threshold as set out in these regulations was put forward as part of this wider review work. This proposal was also endorsed by the Social Justice and Social Security Committee (the Committee) who heard evidence during its inquiry into low income and problem debt which supported this proposal and subsequently recommended it be taken forward. The Committee also recommended that the bankruptcy application fee should be removed for those who cannot make a financial contribution to their bankruptcy.

The cost of living crisis has emphasised the need to bring forward these proposals. Discussions with key stakeholders, with an interest in DAS, also supported the recommendation to bring forward a change to payment breaks. This change will help to ensure the resilience of DAS Debt Payment Plans (DPPs) where people experience a significant increase in living costs which may impact their ability to maintain their regular payments to their DPP. DAS is a debt solution used by thousands of people each year and it is important to maintain the reputation of the scheme to ensure it can continue to help people going forward. This change will help to maintain that reputation.

The Regulations will introduce four changes to our debt solutions:

• remove the minimum debt threshold for accessing Minimal Asset Process bankruptcy which currently stipulates a minimum debt threshold of £1,500 as part of the criteria. This will open up debt relief to those with low levels of debt which may be unsurmountable to them.
• Extend the application fee waiver for individuals who have been assessed by the Common Financial Tool as having no surplus income. This will provide improved access to debt relief for the most financially vulnerable. A fee waiver is already available for those in receipt of certain benefits.
• Extend payment breaks in DAS to allow those in a DPP to apply for a payment break where their disposable income has reduced by 50% or more and it is envisaged the disposable income will be reduced for the period of deferment. This will allow the DPP to stay active for a period of time if the individual cannot afford to make contributions and prevent its revocation and maintain the associated protections against creditor action.
• To increase the deposit creditors must provide when making someone bankrupt from £300 to £750 where Accountant in Bankruptcy (AiB) is appointed as the trustee. Where the bankruptcy realises sufficient funds the deposit is reimbursed to the creditor.